2022 Vermont Solar Tax Credits, Rebates & Other Incentives
Here’s a quick look at the solar incentives in Vermont:
- Federal Solar Tax Credit (ITC)
- Net Metering
- Sales Tax Exemption
- Property Tax Exemption
- Additional City & Utility Rebates
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Solar equipment in Vermont is more affordable than ever before, but homeowners still pay well above average for panels — around $2.87 per watt. With a typical system size of 6 kilowatts required to offset electricity needs in the state, most homeowners pay around $17,220 for solar panel systems. Although the typical solar array in VT pays for itself in under 10 years in most cases, many homeowners struggle to convince themselves that the cost to go solar is worth the investment.
Thankfully, there are some solar incentives available in Vermont that make going solar more affordable or, at the very least, make installing a solar PV system more appealing. Below, we’ll discuss all of the incentives provided by the federal and state governments, as well as how each affects you and your total cost for conversion to clean energy.
Disclaimer: This article is for informational purposes only. It should not be relied on for and is not intended to provide accounting, legal or tax advice.
Current Solar Rebates, Tax Credits and Incentive Programs in Vermont
The table below includes some basic information on the top solar incentives available in Vermont. These brief descriptions should give you a good idea of how you can benefit from going solar. We’ll include additional information further down in the article for incentives provided by the federal government, the State of Vermont and local municipalities and utility providers.
|Vermont Solar Incentive||Description|
|Federal Solar Tax Credit (ITC)||The federal solar tax credit has open eligibility in Vermont. It’s offered by the federal government and gets credited to your federal income taxes for the tax year during which your solar energy system is installed and commissioned. The ITC is one of the most appealing solar incentives, providing a credit in the amount of 30% of your total solar system installation cost.1 In Vermont, that comes out to an average of $5,166.|
|Net Metering||Net metering programs help solar customers offset their electric bills by letting them sell excess energy generated by their solar panels to the power company.2 We’ll discuss the specifics of the arrangement in Vermont below, but, basically, you can reduce your charges for incoming energy from the grid using electricity your panels produce that you don’t use. Vermont has an excellent net metering program that provides nearly a one-to-one credit for overproduction to energy pulled from the grid.|
|Renewable Energy Systems Sales Tax Exemption||In an effort to reduce the upfront cost of going solar, Vermont provides a sales tax exemption for all solar equipment.3 Given the average sales tax rate of 6% in the state and the typical home solar system cost of $17,220, most homeowners will save an average of $1,033 from this solar incentive alone.|
|Uniform Capacity Tax and Exemption for Solar||Vermont’s Uniform Capacity Tax and Exemption for Solar is a property tax exemption. In most cases, home improvements that bump up the value of your home also cause a spike in your property taxes. While solar panels will boost your home value, this property tax exemption prevents your taxes from increasing as a result.4 This exemption applies to all solar arrays up to 50 kilowatts, which is far larger than almost any homeowner would have installed on their home.|
Vermont Solar Incentives
According to the Solar Energy Industries Association (SEIA), Vermont is a relatively solar-friendly state.5 However, there is no state solar tax credit or statewide solar rebate program. Instead, Vermont advocates for the conversion to solar by offering a great net metering program and reducing the barrier to entry into this renewable energy source with tax exemptions. We’ll discuss all of the incentives available throughout the state below.
Vermont Solar Sales and Property Tax Exemptions
Vermont has a lofty Renewable Portfolio Standards (RPS) goal of producing 75% of all of its energy via renewable energy sources by 2032.6 To that end, the state provides a sales tax exemption and a property tax exemption to make going solar more appealing.
The Renewable Energy Systems Sales Tax Exemption prevents homeowners from having to pay the standard 6% sales tax on solar equipment. With a typical system cost of $17,220, this saves most residents an average of $1,033 upfront. It’s important to understand that this is not a rebate but instead a savings that will be reflected in your total solar photovoltaic system cost.
Vermont also provides the Uniform Capacity Tax and Exemption for Solar, which is a property tax exemption. Most home improvements that increase your property value will also cause your property taxes to go up. Thankfully, the property tax exemption prevents this from happening when you install solar, even though solar panels will increase your home’s value. In the long run, this solar incentive could save you thousands of dollars.
Net Metering in Vermont
Net metering is a billing policy that lets you offset your electric bills with excess energy your panels produce.
Despite what some homeowners think, you’ll still require energy from the grid when you have solar panels — unless you install a sufficient solar battery as well. When you use power at night or on cloudy days, the chances are that your panels won’t generate enough power. Through interconnection, the grid can provide the difference via your inverter. On particularly sunny days, your panels can quite easily produce more electricity than you need. The excess power will be routed to the power company. Net metering dictates how you’ll be compensated for the energy you send to the grid.
The Public Service Commission in Vermont has an excellent net metering program that is mandated throughout the state. Public utility companies will pay for your excess power at a “blended rate,” which is just slightly under retail value. The average cost per kilowatt-hour when you pull energy from the grid is around 15 cents, and your energy bill will be credited to about 14 cents per kilowatt-hour of overproduction. This policy isn’t as good as a full one-to-one compensation structure, but it’s still massively beneficial and can help you eliminate your electric bills.
The net metering policy available to you will depend on your utility company, as the terms of net metering aren’t dictated by the state. Green Mountain Power provides access to one of the most appealing net metering policies in Vermont. GMP buys energy at an average of 14.84 cents per kilowatt-hour, which is very close to the retail rate. The credits you acquire in a given month will be rolled over to the following month and can be applied to future bills for any month over the following year after production. After that, the credits will expire.
Unfortunately, there aren’t many local incentives available in Vermont for solar electric equipment, although the other solar incentives are usually enough to convince homeowners to convert to clean energy. Some local utilities provide grants for other energy-efficient purchases, like electric lawnmowers and even electric bicycles. You could couple these purchases with your solar panel installation to become more energy-efficient overall and save some money while reducing your carbon footprint.
Federal Solar Tax Credit
Vermont homeowners also have access to the federal solar investment tax credit (ITC), which is provided by the federal government to all taxpayers in the country. The ITC gets credited to your federal income tax liability for the year your system is installed. While it’s not an immediate credit, it can significantly decrease your effective cost of going solar.
The ITC provides a significant credit in the amount of 30% of your total solar system cost. In Vermont, where the average solar system totals $17,220, most homeowners will get a credit of $5,166. If your federal tax liability is less than your credit amount, you can roll over the balance to future tax years.
The 30% federal solar tax credit applies to all residential solar installations in the U.S. through 2032. It is set to reduce to 26% for systems installed in 2033 and 22% in 2034 before expiring completely in 2035, unless renewed by Congress.
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FAQ: Vermont Solar Incentives
Solar conversions are becoming more and more popular in Vermont, and the EcoWatch team is getting an increasing number of questions about solar incentives from Vermonters. Below are some of the questions we see most often from homeowners in your area. If you have specific questions that aren’t answered here, reach out to our team of solar experts at email@example.com.
Unfortunately, no, Vermont does not have a state solar tax credit. While many states use a state tax credit to incentivize homeowners to convert to solar energy, Vermont’s Renewable Portfolio Standard (RPS) doesn’t have a solar-specific energy goal and instead focuses on renewable energy as a whole. Instead, the State of Vermont makes solar a more appealing option by providing a solid net metering policy and a slew of other benefits, including tax incentives.
In addition to state solar incentives, the federal solar tax credit (ITC) is available to all homeowners in the Green Mountain State. The ITC is a tax credit in the amount of 30% of your total solar system cost, which averages out to about $5,166 in Vermont, given the average solar system cost of $17,220. This amount is credited to your federal income tax liability and can be rolled over to future years if the total exceeds what you owe for the year you install your system.
Yes! There are quite a few solar incentives available in Vermont in 2022. Most importantly, Vermonters can take advantage of the federal solar tax credit, which is a credit to federal income tax in the amount of 30% of your system cost.
Vermont residents can also enjoy a sales tax exemption and a property tax exemption on solar equipment. The sales tax exemption prevents you from having to pay the standard 6% state sales tax on your solar equipment and installation costs. On average, this saves Vermont solar customers approximately $1,033 upfront on their solar conversion.
The property exemption is another long-term solar incentive. In normal circumstances, home improvements like installing solar panels will increase the value of your home, which will lead to a bump in your property taxes. The property tax exemption in Vermont prevents your solar conversion from affecting your property taxes, so you’ll enjoy the increased home value without increasing your taxes.
Solar customers in Vermont can also enjoy a great net metering program, which allows homeowners to offset their electricity bills quite substantially by overproducing energy with their panels. Vermont’s net metering rate is just under the retail rate, which is great news for homeowners.
As of 2022, there are no solar-specific rebates available in Vermont. However, some local utility companies provide small rebates for energy-efficiency upgrades. These can include solar water heaters, new insulation, new windows and doors, LED lighting, low-flow faucets, high-efficiency appliances and more. Some rebates for fun upgrades, like electric lawnmowers and electric bicycles, are also available. You can check the DSIRE database or contact your utility company for more information.
Thankfully, solar panels will not cause your property taxes to go up in Vermont. Most home improvements that bump up your home value will also cause your property taxes to go up, as your taxes are a percentage of your home’s assessed value. Installing a solar power system in Vermont will increase your property value, provided you acquire them with a cash purchase or a solar loan — leasing your panels will not increase your home value. However, Vermont’s Uniform Capacity Tax and Exemption for Solar exempts that added value from being assessed for taxes. As such, your property taxes will not increase from going solar, potentially saving you thousands of dollars over the lifespan of your solar equipment.